Traditional IRA

A Traditional IRA is a perfect investment vehicle for retirement, and is primarily used for individual savings. Your contributions are made up to a specified limit per year and in most cases, funds must remain on deposit until age 59+. Plus, the funds you contribute are usually tax deductible. Likewise, your earnings on the IRA account are not taxed until you begin withdrawals.

Benefits/Good To Know

Application Process

Tools

FAQs

Benefits

Dividends are paid monthly

Ability to make contributions conveniently to your IRA variable account

Ability to make contributions conveniently with payroll deductions

Perfect for reinvesting a 401K, Retirement Account or Stock Rollover from a previous job

Good To Know

Funds you contribute and earn are subject to taxes at the time your begin to withdraw

Available in a variable account with a minimum deposit of $25

A minimum opening deposit of $500 for an IRA Share Certificate

Applications are typically processed within 24 business hours (excluding holidays and weekends).

IMPORTANT INFORMATION REGARDING IRA ROLLOVERS:

The IRS has changed its long-standing position on the one-per-12 month rule for IRA rollovers. In the new IRS interpretation, an IRA owner may complete only one IRA rollover in any 12-month period, regardless of how many IRAs he/she owns.

Application Process

1. Open an IRA:

Complete the IRA application

Complete the application at any branch location

Complete the application via the IRA Center:

Beneficiary (s)

All applications may include a beneficiary(s).

You will need each beneficiary’s:

Name

Address

Date of birth

Social Security Number

Fund the Account

Minimum to open an IRA variable is: $25.00

Minimum to open a IRA certificate is $500.00

2. Rollover or Transfer an IRA or Qualified Retirement Plan:

To begin the transfer you will need to complete/provide the following:

To begin the transfer you will need to complete/provide the following:

IRA application/Contribution form (required)

Contact your plan administrator for forms to initiate the rollover.

3. Rollover, Transfers or Withdrawals:

IRA paperwork is required each time you make a rollover, transfer, or a withdrawal. For example, you may want to rollover more funds from another institution to your IRA account that is already established with JSC FCU. You will still be required to complete IRA paperwork for any future transactions.

Tools

Planning Tools

Informed planning is one of the cornerstones of an effective retirement strategy.

On the retirement planning workbench below, you'll find a wide-variety of planning tools covering numerous aspects of retirement planning, from selecting the best type of IRA to designing a retirement income strategy that best fits your personal objectives.

Each planning tool includes a thorough introduction of the tool's purpose as well as a summary of the financial information you'll need to have available when using the tool. As you begin using your planning tools, be sure to check out the links on the right-hand side of your screen for specific recommendations on related information and tools that may also be helpful.

Beneficiary Planners

Are you an IRA beneficiary? If so, don't miss out on the significant tax-deferral options available to you. These tools will help you identify your distribution options, project future payments, and calculate required beneficiary distributions.

Beneficiary Options Calculator Review the options available for all types of beneficiaries to determine which will best assist you in maximizing tax deferrals and minimizing required minimum distributions (RMDs).

Beneficiary Payout Calculator The Beneficiary Payout Calculator is designed to assist beneficiaries of deceased IRA owners in calculating required distributions from the decedent's IRA.

Beneficiary Rollover Planner Are you a beneficiary receiving a lump-sum distribution from an employer-sponsored retirement plan? This tool will help you identify the tax options available to you and compare the retirement income implications of your various alternatives.

College Savings Planner Sending your kids to college? This tool will help you estimate how much savings you need to accumulate to meet your financial objectives for college expenses.

Early Payout Planners (IRC Sec. 72(t))

Retiring early? These tools will help you structure payments that qualify for exemption from the 10 percent early distribution penalty tax, which typically applies to distributions taken before age 59½.

Comparison Projector Calculator Use this tool to compare the three substantially equal periodic payment structures authorized by the IRS for avoiding the 10 percent early distribution penalty tax.

IRA Eligibility CalculatorWhat type of IRA are you eligible for? This tool helps you determine your eligibility for making Traditional IRA or Roth IRA contributions.

IRA Selector Tools

What type of IRA is best for you based on your financial circumstances and retirement objectives? These tools help you weigh the pros and cons of Traditional and Roth IRAs from a variety of perspectives.

Legacy Planning CalculatorThis tool helps you measure the potential wealth accumulation implications of selecting a Traditional or Roth IRA for you and your beneficiaries.

Breakeven Analysis CalculatorUnsure of what your tax rates will be in 20 years? This unique tool helps you look at IRA selection from the standpoint of breakeven analysis (e.g., What if my effective tax rate in retirement is 30 percent rather than 25 percent?).

Required Minimum Distribution (RMD) Planners

Approaching age 70½? Are you already in RMD status? These tools will help you understand the implications of the RMD rules and calculate withdrawals that meet the RMD requirements.

Retirement Savings PlannerIt doesn't matter whether your retirement is 3 years away or 40 years away; it's never too soon or too late to begin planning. This retirement savings tool will help you estimate how much savings you will need to accumulate in order to meet your retirement objectives.

Rollover Planners

Receiving a lump-sum distribution from an employer-sponsored retirement plan? These tools will help you identify the tax options available to you and compare the retirement income implications of your various alternatives.

Plan Participant Calculator Receiving a lump-sum distribution from an employer-sponsored retirement plan? This tool will help you identify your tax options and compare the retirement income implications of your various alternatives.

Roth IRA Conversion Tools

Should you consider converting some or all of your Traditional IRA assets to a Roth IRA? These tools help you weigh the pros and cons of a Roth IRA conversion from a variety of perspectives.

FAQs

Am I eligible for a Traditional IRA?

You are eligible to contribute to a Traditional IRA if you are under age 70½ and you (or your spouse if married, filing a joint tax return) have eligible compensation. For IRA purposes, eligible compensation generally is defined as what you earn from working and includes wages, salary, tips, commissions, bonuses, and self-employment income, but not investment or pension income. Traditional IRA eligibility is not affected by whether you are covered by an employer-sponsored retirement plan.

How do tax-deductible contributions help me save for retirement?

If you can deduct contributions to a Traditional IRA, you will receive a tax break up front, thereby reducing your taxable income in that year.

Let’s assume you’re in the 25 percent federal marginal tax bracket for the 2013 tax year and you make the maximum annual IRA contribution of $5,500; you essentially might save $1,375 in current-year federal taxes. The bottom line is that after tax, your $5,500 contribution actually only costs you $3,625.

In addition to the up-front tax break, money in a Traditional IRA accumulates tax-deferred, which means that until the year you withdraw the money, you won’t have to pay taxes on it. At the time that you do withdraw the money, both your deductible contributions and earnings will be taxed at your regular income tax rate, which may be higher or lower at retirement.

Why would I make non-deductible contributions to a Traditional IRA?

Making a non-deductible contribution to a Traditional IRA may be your only IRA option if you make too much money to contribute to a Roth IRA and you or are not eligible to make deductible contributions to a Traditional IRA. There still are benefits to making IRA contributions.

Regardless of whether you were able to deduct your Traditional IRA contribution, the earnings accumulate tax-deferred and therefore, will not be taxed until you take money out of your IRA. And because your contributions were not tax-deductible, when you withdraw the money later, you won’t owe any tax on the non-deductible contribution portion of that withdrawal.

For any year that you do not deduct your Traditional IRA contributions, you will need to file IRS Form 8606, Nondeductible IRAs, with your tax return to let the IRS know that your contribution was nondeductible. Failing to file this form may result in double taxation and possible penalties.

How do I know if I am eligible to make tax-deductible contributions?

Assuming you are under age 70½ and you have eligible compensation, your eligibility to take a tax deduction for a Traditional IRA contribution depends on your modified adjusted gross income (MAGI)*, tax filing status, and whether you or your spouse actively participate in an employer-sponsored retirement plan. If neither you nor your spouse is an active participant, you are eligible to deduct your full contribution. Otherwise, refer to the chart below to determine how much of a deduction you may take.

Tax-Filing Status

Active Participant

Year

Full Deduction if MAGI is

Partial Deduction if MAGI is

No Deduction if MAGI is

Single

Yes

2012

$58,000 or less

$58,000–$68,000

$68,000 or more

2013

$59,000 or less

$59,000–$69,000

$69,000 or more

Married, filing jointly

Yes

2012

$92,000 or less

$92,000–$112,000

$112,000 or more

2013

$95,000 or less

$95,000–$115,000

$115,000 or more

Married, filing jointly

No, but spouse is

2012

$173,000 or less

$173,000–$183,000

$183,000 or more

2013

$178,000 or less

$178,000–$188,000

$188,000 or more

*Modified adjusted gross income (MAGI) is your adjusted gross income before certain deductions or adjustments to income.

Can I withdraw money from my IRA before age 59½?

Because Congress created Traditional IRAs as a tax-deferred way to save for retirement, most distributions from a Traditional IRA will be taxed as ordinary income and an additional 10 percent early distribution penalty tax may apply if the money is taken out before you reach age 59½ (six months after your 59th birthday). The early distribution penalty tax does not apply if your distribution is taken for any of the following reasons (subject to certain restrictions).

Payments to beneficiaries after an IRA owner’s death

Disability (permanently disabled under the IRS definition)

First-time homebuyer expenses

Unreimbursed medical expenses that exceed a certain amount of income

Health insurance premiums during unemployment

Qualified higher education expenses

IRS levy

Substantially equal periodic payments

Qualified reservist distributions

Once you reach age 59½, you can withdraw money from your Traditional IRA for any reason without having to pay the 10 percent early distribution penalty tax.

Why and when must I start taking money from my Traditional IRA?

Congress created Traditional IRAs as a tax-favored way to save for retirement, not as a way to permanently shelter savings from income taxes. Consequently, the law requires you to start distributing your Traditional IRA assets once you reach a certain age. You must begin taking money out annually once you turn age 70½. You must take your first payment by April 1 of the year following the year in which you reach age 70½. This is called your required beginning date (RBD). These annual minimum payments are called required minimum distributions (RMDs).

For years after your RBD, you are required to take RMDs by December 31 of each year. You can always withdraw more than the minimum amount, but if you do not take at least the RMD amount, you may be subject to a 50 percent excess accumulation penalty tax on the amount you did not take.

What are the general rules and penalties for RMDs?

Each year, beginning with your 70½ year, the financial organization administering your IRA must notify you that an RMD is due. If it does not provide the RMD amount within this notice, it must offer to calculate the amount for you. In addition, financial organizations are required to annually notify the IRS of all IRAs that are subject to RMDs.

You are then responsible for ensuring that your RMD is satisfied each year. You can always withdraw more than the RMD amount, but if you do not take at least the RMD amount, you may be subject to a 50 percent excess accumulation penalty tax on the amount you did not take.

How is my RMD calculated?

Your RMD is calculated each year by dividing the prior year-end balance in your Traditional IRA by your life expectancy factor. You can refer to the IRS’ Uniform Lifetime Table in IRS Publication 590, Individual Retirement Arrangements (IRAs) to get the life expectancy factor that is based on your age in the distribution year. If your spouse happens to be more than 10 years younger than you and is the sole beneficiary of your IRA, you can use the joint life expectancy factor from the IRS’ Joint Life Expectancy Table (also found in Publication 590).

What things should I think about if I am considering taking substantially equal periodic payments?

Consider the payment size Substantially equal periodic payments is a distribution method some taxpayers elect when they need to access their IRA money before they reach age 59½. Before you use the periodic payment exception, consider that the size of your payments may be relatively small, unless you have a substantial IRA balance. Payments are calculated based on your life expectancy, and your life expectancy is still quite long when you’re under age 59½.

Therefore, if you think you’ll need more than small amounts of money doled out regularly, these payments might not be enough to meet your needs.

Consider other alternatives Before using the periodic payment exception, consider your other alternatives. If you need the money because you’re taking early retirement, consider the possibility you may return to work at a later date and no longer need the income.

Or if you are still relatively young or you only need money for a one-time expense, consider postponing the expense until you reach age 59½, especially if that’s not too far off. If that’s not possible, consider making a single early withdrawal, paying the 10 percent tax, and leaving the rest of your IRA intact to grow tax-deferred. If you elect the periodic payment option, you will be required to distribute a specific annual amount from your IRA for several years.

Consider other sources of money too. For example, if you plan to leave your job when you reach age 55 or later and you have a 401(k) plan, you can tap into your 401(k) plan without incurring an early distribution penalty tax.

Decide on a distribution method The IRS provides different distribution methods by which you can receive payments, and pros and cons to each, so make sure you get the details. Also consider consulting with a financial representative or tax advisor experienced in IRA distributions, especially if your IRA balance is substantial.

The payment method that’s appropriate for you somewhat depends on whether you want to minimize or maximize the size of your payments. Although you may initially consider a method that calculates larger payments, you’ll deplete your IRA faster and lose the benefit of future tax-deferred growth.

And if it turns out that you don’t need the larger payments after all, you cannot put your withdrawals back into your IRA or roll them over to an IRA or other retirement plan.

Keep in mind that when you do begin to take payments, you—not your IRA custodian—are responsible for making sure you take the right amount each year. Keep good records and documentation for any follow-up questions.

Consider income taxes When deciding to use the periodic payment exception, also consider the income taxes you will owe on the distributions. Although you’ll avoid the 10 percent penalty tax, you still have to pay ordinary income taxes on the taxable portion of each withdrawal; the larger your payments, the more tax you’ll owe. You may have to pay estimated income taxes on the payments.

Do I still have to take an RMD if I don’t need the money?

Even if you don't need the money from your Traditional IRA, you must take your RMD.

If I name a charity as my beneficiary, does that change the calculation of my RMD?

No, you will use the Uniform Lifetime Table to calculate your RMD.

FAQs are not intended to provide tax advice and we recommend contacting a tax professional for further assistance.

Services

Talk to Us

Third Party Link Disclaimer - JSC Federal Credit Union (JSC FCU) does not endorse or guarantee 3rd party links. The products and services offered on 3rd party sites are not products of JSC FCU. JSC FCU cannot attest to the accuracy of information provided by the linked sites. Linking to a web site does not constitute endorsement by JSC FCU, or any of its employees, of the sponsors of the site or the products presented on the site. Other websites which you may link to from the Credit Union's site are not bound by the JSC FCU Website Privacy Policy. The calculators provide estimates only. *APY = Annual Percentage Yield. APR = Annual Percentage Rate and is accurate as of 02/06/2019. Auto Loan rates range from 3.24% APR - 13.24% APR and subject to change. All Rates are subject to change without notice. Lending rates are subject to credit approval. A fixed-rate loan for $20,000 based upon a 2.89% APR paid over 60 months would have 60 monthly payments of $358.41. All Share accounts are compounded and paid quarterly. Share Drafts are compounded and paid monthly. Rates may change after account is opened. All Share Certificates are compounded and paid monthly. Fees can reduce the earnings of deposit accounts. Penalties may apply for early withdrawal of Share Certificate deposits. Rebuild Personal Loan Rate ranges from 7.90% APR – 15.90% APR as of 05/08/2018 and subject to change. Lending rates are subject to credit approval. A fixed-rate loan for $15,000 based upon a 7.90% APR paid over 60 months would have 60 monthly payments of $303.20. $30,000 is the maximum allowable amount of unsecured loans per member. The Rebuild Personal Loan cannot be used to pay off any currently financed JSC FCU loan. **Certain restrictions apply. As of May 2009, your savings are federally insured up to at least $250,000 by the National Credit Union Administration, a U.S. government agency.

eBanking Login

By accessing this link, you will be leaving JSC Federal Credit Union’s website and entering an external third party site. The external website you are linking to is not operated by JSC Federal Credit Union and is not responsible for the product, service, overall website content, security or privacy policies. Privacy and security policies may differ between our website and external sites. Please consult the site’s policies for further information.